U.S. District Judge Lucy H. Koh has denied a request to preliminarily approve a $324.5 million settlement agreement that would have ended a high-profile antitrust class action. It was claimed that Google Inc., Apple Inc., Intel Corp. and Adobe Systems Inc. illegally agreed not to “poach each other’s software engineers,” calling for at least $55 million more. Judge Koh ruled that class members would recover proportionally less from the settlement than from settlements agreed to last year with Intuit Inc., Lucasfilm Ltd. and Pixar Animation Studios Inc. Judge Koh said further that she was especially troubled that the latest settlement came after she granted class certification, giving the Plaintiffs substantial leverage. Judge Koh wrote in his decision:
Counsel’s sole explanation for this reduced figure is that there are weaknesses in plaintiffs’ case such that the class faces a substantial risk of nonrecovery. However, that risk existed and was even greater when plaintiffs settled with the settled defendants a year ago, when class certification had been denied.
It’s recognized that Judge Koh’s order denying the Plaintiffs’ request to preliminarily approve of the settlement is a most serious setback to the tech giants’ bid to end allegations that they suppressed software engineer pay by secretly agreeing not hire each other’s workers.
The basis for the antitrust class action came to light in 2012 when a Department of Justice (DOJ) investigation revealed that the Silicon Valley giants had brokered agreements not to compete for one another’s engineers. The DOJ concluded the companies had reached “facially uncompetitive” deals that limited the employees’ job prospects. Although the companies agreed to halt those practices in 2010, a large number of private class actions were filed.
Software engineers sued Apple, Google and other Silicon Valley companies for damages, claiming that the companies had agreed to provide each other notice whenever one made an offer to another company’s employee. They also agreed to cap pay packages for prospective hires in order to prevent bidding wars and to abstain from recruiting one another’s personnel. The agreements also allegedly depressed the workers’ pay 10 to 15 percent lower than it would have been with natural market conditions.
Judge Koh said that the settlement should be at least $380 million. The judge used last year’s settlements as a baseline for how much the Plaintiffs should receive from the remaining Defendants. The companies behind last year’s $20 million in settlements represented only 5 percent of the total compensation paid to the tens of thousands of engineers. Other Defendants in this case had already settled before the court granted class certification. In 2013, Lucasfilm Ltd. and Pixar Animation Studios Inc. paid $9 million and were dismissed from the suit, while Intuit Inc. paid out $11 million.
Michael Devine, the named Plaintiff, lodged objections to the settlement in June. He claimed that, given the strength of the Plaintiffs’ evidence and the ability of the tech giants to pay more, the proposed $324.5 million payday for the class was insufficient to deter similar nonpoaching practices in the future. It appears Judge Koh agrees with Mr. Devine.
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